scholarly journals The Long-Run Effects of the Fed’s Monetary Policy on the Dynamics among Major Asset Classes

2016 ◽  
Vol 51 (1) ◽  
pp. 9-19
Author(s):  
Jia Miao
Keyword(s):  
Monetary Policy ◽  
Financial Markets ◽  
Financial Assets ◽  
Monetary Policies ◽  
Real Estate Markets ◽  
Long Run ◽  
Cointegration Tests ◽  
Asset Classes ◽  
The Impact ◽  
The Relationship

Abstract It is well known that government monetary policies significantly impact financial markets. There have been numerous studies examining the relationship between monetary policy and the prices of financial assets, including equities and bonds. Little, however, has been done to explore the impact of major financial assets on changes in monetary policies. This study examines the impacts of the Federal Reserve’s monetary policy on the dynamics of major financial assets in the U. S. For this purpose, cointegration was tested for between equities, bonds and real estate markets in the period 1980 to 2014, whereas the U. S. monetary base M2 was used as an exogenous variable. Our cointegration tests suggest that the exogenous component of the U. S. M2 significantly affected the interaction among major U. S. financial assets. These findings have implications for both policymakers and market practitioners in terms of portfolio allocation rules.

scholarly journals The Asymmetric Effect of Panic Index on Cryptocurrencies

2021 ◽  
Vol 7 ◽  
Author(s):  
Necmiye Serap Vurur
Keyword(s):  
Financial Markets ◽  
Money Market ◽  
Financial Assets ◽  
Causality Analysis ◽  
Asymmetric Effect ◽  
Causality Test ◽  
Causality Tests ◽  
The Impact ◽  
Asymmetric Causality ◽  
The Relationship

The Covid 19 pandemic is the first major crisis facing cryptocurrencies. Therefore, the reaction of the cryptocurrency markets is important. News about epidemics affects investors' decisions. Panic index (PIndex) is an index created from news about the Covid 19 outbreak. In the study, it is used to measure the impact of decisions on the crypto money market. As cryptocurrencies, Bitcoin (BTC), Etherium (ETH), and Ripple (XRP), which have the highest transaction volume in the crypto money market, are included in the analysis. The relationship between Panic Index and the three major cryptocurrencies with the largest share in the cryptocurrency market was investigated by Ardl and Hatemi-J asymmetric causality test. Traditional causality tests acknowledge that the effects of positive and negative changes are the same. However, there may be asymmetric information and different investor behaviors in financial markets. In the study, Hatemi-J [1] Asymmetric Causality Test was conducted to examine the asymmetric relationship and symmetric relationship between Pindex and cryptocurrencies by separating them into positive and negative shocks. According to the results of the Hatemi-J causality analysis, positive shocks in the panic index are the cause of negative shocks for all cryptocurrencies. In other words, increases in the panic index are caused to fall the value of Bitcoin, Ethereum, and Ripple cryptocurrencies decrease. The results show that cryptocurrencies were not a safe haven for the investor during the Covid 19 period, as they acted similarly to other financial assets.

scholarly journals ARE THE EFFECTS OF UNCONVENTIONAL MONETARY POLICY ON FINANCIAL MARKETS CAUSING BUBBLES?

2019 ◽  
Vol 1 (1) ◽  
pp. 1-1 ◽  
Author(s):  
Daniel Lacalle
Keyword(s):  
Financial Markets ◽  
Central Banks ◽  
Unintended Consequences ◽  
Quantitative Easing ◽  
Unconventional Monetary Policy ◽  
Monetary Policies ◽  
Policy Makers ◽  
The Past ◽  
Long Run ◽  
Asset Classes

Cheap money can become very expensive in the long run. Unconventional monetary policies have been the main tools of central banks to tackle the economic crisis. In this paper we aim to understand whether these policies have created distortions in the fi nancial markets and if we can be concerned about the creation of “bubbles”, considering whether quantitative easing has impacted fi nancial asset classes’ valuations beyond reasonable fundamentals. I conclude that there is empirical evidence of inordinate expansion of multiples and that central bank policy makers should include “fi nancial market infl ation” as well as consumer price indices (CPI) in their assessment of infl ation expectations. I believe that this should be an essential analysis to avoid unintended consequences in the future, and a possible next fi nancial crisis that central banks will be unable to face with the same tools of the past.

Relationship between Conventional and Islamic Interbank Rates of a Dual Banking System in Malaysia, Middle East, and Western Countries

2019 ◽  
Vol 4 (2) ◽  
pp. 38
Author(s):  
Zetty Zahureen Mohd Yusoff ◽  
Nur Iylia Azhar
Keyword(s):  
Monetary Policy ◽  
Middle East ◽  
Causal Effect ◽  
Panel Study ◽  
The Body ◽  
Monetary Policies ◽  
Western Countries ◽  
Middle East Countries ◽  
Long Run ◽  
The Relationship

The purpose of this research is to investigate the relationship between conventional monetary policy rate (CIMMR) and Islamic monetary policy rate (IIMMR) in Malaysia and selected Middle East countries and Western countries. This study runs a panel Cointegration test, a panel VECM and Wald test to examine the relationship and causal effect between the CIMMR and IIMMR for the sample of six countries starting from 2009 until 2018 based on monthly and yearly basis dataset. This study finds that CIMMR and IIMMR, in monthly and yearly basis, are both cointegrated and have a long-run relationship amongst them. Our findings confirm that there is a long run causality effect between conventional and Islamic monetary policies based on monthly interbank rates. Our findings further confirm that there is a short run causality effect between conventional and Islamic monetary policies based on yearly interbank rates. We confident that the implication of Islamic interbank rates in the implementation of monetary policy within a dual system is very high as proven by taking into consideration a different regions as samples for this panel study. To the best of the authors’ knowledge, this would greatly contribute to the body of knowledge in the field of monetary policy.

scholarly journals THE RELATIONSHIP BETWEEN MONETARY POLICY AND PRIVATE SECTOR CREDIT IN SADC COUNTRIES

2021 ◽  
Vol 9 (1) ◽  
pp. 46-54
Author(s):  
Vikela Liso Sithole ◽  
◽  
Tembeka Ndlwana ◽  
Kin Sibanda ◽  
◽  
...  
Keyword(s):  
Monetary Policy ◽  
Gross Domestic Product ◽  
Private Sector ◽  
Money Supply ◽  
Sustainable Growth ◽  
Domestic Product ◽  
Distributed Lag ◽  
Long Run ◽  
The Impact ◽  
The Relationship

This paper empirically examined the relationship between monetary policy and private sector credit in the Southern African Development Community (SADC) group of countries using a panel autoregressive distributed lag (ARDL) co-integration technique for the period from 2009 to 2018. The Hausman test result indicated that the null hypothesis of long-run homogeneity cannot be rejected and hence we accept the pooled mean group estimators (PMGE) as a consistent and efficient estimator. The PMGE results showed that credit to the private sector and gross domestic product have a positive and statistically significant long-run impact on money supply. The impact of credit to the private sector on money supply is shown by the results to be statistically significant and positive both in the short and long run. The impact of gross domestic product on money supply was found to be statistically significant positive in the long run while positive but insignificant in the short run. The study recommends policy attention that is directed towards the appetite for accelerated growth, investment, and employment in the SADC region but more importantly with more regard to the establishment of sustained macroeconomic stability as a precondition to sustainable growth and for the creation of monetary union in the region.

scholarly journals Monetary Policy and Economic Growth: A Review of International Literature

2018 ◽  
Vol 7 (2) ◽  
pp. 123-137 ◽  
Author(s):  
Enock Nyorekwa Twinoburyo ◽  
Nicholas M. Odhiambo
Keyword(s):  
Economic Growth ◽  
Monetary Policy ◽  
Financial Markets ◽  
Developing Economies ◽  
Developed Economies ◽  
Long Run ◽  
Wide Range ◽  
Short Run ◽  
Theoretical Evolution ◽  
The Relationship

Abstract This paper aims to survey the existing literature, both theoretical and empirical, on the relationship between monetary policy and economic growth. While there has been a wide range of studies on the existing relationship between monetary policy and economic growth, the nexus between the two remains inconclusive. This paper takes a comprehensive view of the theoretical evolution of the relationship and the respective recent empirical findings. Overall, this paper shows that the majority of findings support the relevancy of monetary policy in supporting economic growth, mainly in financially developed economies with fairly independent central banks. The relationship tends to be weaker in developing economies with structural weaknesses and underdeveloped financial markets that are weakly integrated into global markets. This paper concludes that monetary policy matters for growth both in the short-run and long-run despite the prevailing ambiguous relationship. The paper recommends intensive financial development measure for developing countries as well as structural reforms to address to supply side deficiencies.

scholarly journals The Relationship Between Cat Bond Market and Other Financial Asset Markets: Evidence from Cointegration Tests

2021 ◽  
Vol 6 (2) ◽  
pp. 78-85
Author(s):  
Chaouki Mouelhi
Keyword(s):  
Stock Market ◽  
Financial Markets ◽  
Correlation Coefficient ◽  
Rank Correlation ◽  
Long Run ◽  
Cat Bonds ◽  
Cointegration Tests ◽  
Short Run ◽  
Decision Choice ◽  
The Relationship

This study examines the relationship between Cat Bonds market and the other financial markets. Precisely, cointegration tests (the Engle and Granger’s methodology) were applied on weekly data of five indexes over the period 2012- 2019 to test for the existence of a long-run dynamic equilibrium relationship between Cat Bonds market and four financial markets, namely, Insurance Linked Securities (ILS) market, S&P 500 (first stock market), MSCI (second stock market) and Corporate Bonds market. In addition, a comparative analysis correlation vs cointegration was conducted to verify whether Cat Bonds can be really considered as zero-beta assets in the short-run (correlation) as well as the long-run (cointegration). For correlation analysis we employed three correlation coefficients (Pearson’s Correlation Coefficient, Spearman’s Rank Correlation Coefficient and Kendall's Rank Correlation Coefficient). Overall, the main findings of this study showed that in the short-run, Cat Bonds are partially zero-beta assets while over the long-run they are entirely zero-beta assets. Such results will be of great importance for investors in their decision choice between a short strategy or a long strategy in Cat Bonds’ investing.

scholarly journals Monetary Policy and Financial Asset Prices: Empirical Evidence from Pakistan

2018 ◽  
Vol 7 (2) ◽  
pp. 149-160
Author(s):  
Imran Umer Chhapra ◽  
Muhammad Usama Ali ◽  
Syeda Fizza Zehra ◽  
Falak Naz
Keyword(s):  
Monetary Policy ◽  
Financial Markets ◽  
Stock Price ◽  
Monetary Transmission ◽  
Investment Strategies ◽  
Vector Autoregressive ◽  
Bond Yield ◽  
Asset Classes ◽  
The Impact

Monetary transmission mechanism assumed to be significantly influenced by the effect of policy decisions on financial markets. However, various previous studies have come up with different outcomes. The purpose of this study is to examine the impact of monetary policy on different asset classes (shares and bonds) in Pakistan. This study using stock price and bond yield as dependent variable and discount rate, money supply, inflation, and exchange rate are independent variables. Data of all variables have collected from 2010 to 2016, and Vector Autoregressive (VAR) technique has applied. The empirical results indicate that there is an impact of monetary policy components on both stock and bond market as an increase in policy rate causes decline in stocks prices and bonds yields. The findings of this study will help the potential investors in making long-term (in general) and short-term (in particular) investment strategies concerning monetary policy.DOI: 10.15408/sjie.v7i2.7099

Normative dimensions of central banking: How the guardians of financial markets affect justice

2017 ◽  
Author(s):  
Peter Dietsch
Keyword(s):  
Monetary Policy ◽  
Financial Crisis ◽  
Financial Markets ◽  
Central Banking ◽  
Democratic Legitimacy ◽  
Policy Agenda ◽  
Theory Of Justice ◽  
Introductory Section ◽  
The Impact

Monetary policy, and the response it elicits from financial markets, raises normative questions. This chapter, building on an introductory section on the objectives and instruments of monetary policy, analyzes two such questions. First, it assesses the impact of monetary policy on inequality and argues that the unconventional policies adopted in the wake of the financial crisis exacerbate inequalities in income and wealth. Depending on the theory of justice one holds, this impact is problematic. Should monetary policy be sensitive to inequalities and, if so, how? Second, the chapter argues that the leverage that financial markets have today over the monetary policy agenda undermines democratic legitimacy.

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